UPDATE 2-RadioShack falls short of Street view on margins

Tue Feb 22, 2011 5:42pm EST

* Q4 EPS 51 cents vs Wall Street view 53 cents

* Sales up 3.8 percent to $1.37 billion

* Sees 2011 EPS $1.60-$1.90, Street view is $1.80 (Revises first sentence, adds CFO comments and details on competition, margins)

SAN FRANCISCO, Feb 22 (Reuters) - RadioShack Corp (RSH.N) reported a steeper decline in quarterly profit than Wall Street expected, hurt by higher markdowns over the holidays and weakness in its T-Mobile business.

Demand for lower-margin wireless handsets also weighed on the U.S. electronics retailer's margins.

Net income in the fourth quarter ended Dec. 31 was $57 million, or 51 cents per share, compared with $75.7 million, or 60 cents per share, a year earlier.

Analysts on average were expecting earnings of 53 cents per share, according to Thomson Reuters I/B/E/S.

Net sales rose 3.8 percent to $1.37 billion, the company said, above the $1.01 billion expected by Wall Street.

The retailer has sought to counter weak demand for converter boxes, antennas and other accessories by selling wireless devices and calling plans.

But it faces stiff competition from larger rival Best Buy Co Inc (BBY.N), online retailers like Amazon.com (AMZN.O) and some carriers that sell phones directly to consumers.

Radio Shack has also been investing more in wireless kiosks inside Target Corp (TGT.N) stores, adding more pressure on margins.

Last year, RadioShack signed a deal with T-Mobile USA Inc, a unit of Deutsche Telecom (DTEGn.DE), in an effort to boost its wireless business.

But in late January, the company warned about weakness in margins and cited a disappointing performance in that new T-Mobile business.

Gross margins fell to 41 percent of sales from 43.9 percent a year earlier.

"During the quarter, we struggled with T-Mobile's product offerings not being competitive with other carriers," said Jim Gooch, currently the company's president and chief financial officer who will assume the role of chief executive in May.

Without elaborating, he said that T-Mobile had "materially breached" its contract during the fourth quarter and said legal discussions were under way.

Radio Shack announced last month that its current CEO, Julian Day, would retire, to be succeeded by Gooch. [ID:nSGE70N0CP]

Looking ahead, Radio Shack said it expects 2011 earnings to range between $1.60 to $1.90 per share, with sales to rise in the low-to-mid single-digit percent range.

Analysts on average have been expecting 2011 earnings per share of $1.80.

Shares closed down 2.5 percent at $15.31 on the New York Stock Exchange, but did not move after hours. (Reporting by Alexandria Sage and Dhanya Skariachan; Editing by Tim Dobbyn and Matthew Lewis)

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